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Investor Sentiment for August 2007

AAII, AMG Money Flow and CPC - Put/Call Ratio

Aug 22, 2007

An analysis of Investor Sentiment Indicators that show stock market investors are currently more bearish than typical

Sentiment indicators are used by market timers as contrarian signals. The simple theory is if everyone is bullish and in the market with no new money to buy, then the only direction the market can go is down when someone decides to sell. Likewise, if everyone is out of the market, then the only direction it can go is up when someone decides to buy.

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AAII: American Association of Individual Investors

A weekly poll conducted by the American Association of Individual Investors.

4-3-00: 77.78% and the S&P500 closed at 1505.97
7-19-02: 32.88% and the S&P500 closed at 847.75
7-23-02: 32.88% and the S&P500 closed at 797.70

As of August 17th: Bulls = 42.2%, Bears = 45.6% with the four week moving average at 52.46%. Chart of the 52 week moving average

AMG Money Flow

A report of how much money is flowing into and out of domestic equity mutual funds including ETFs.

Since July 2002, the record high for equity funds is $11.9B
Since July 2002, the record low for equity funds is negative $12.2B
A negative reading means investors were taking money out

As of August 15, 2007 equity fund inflows were $6.5B

CPC: CBOE Put/Call Ratio

The CPC is the Chicago Board of Options Exchange Total Put/Call ratio. Traders buy puts when they are bearish and they buy calls when they are bullish. The 66 day moving average (66 DMA) of the put/call ratio is the “Three Month Moving Average” in that there are usually 22 trading days each month, on average.

The 66 DMA of CPC record high is 1.06 (August 2007)
The 66 DMA of CPC record low is
The 10 DMA of CPC record high is 1.29 (March 2007)
The 10 DMA of CPC record low is 0.422 (March 2000)
As of August 22, 2007 the 66 DMA of CPC is 1.06, a record high reading.
Bob Brinker uses the 60 day moving average which is very similar to the 66 day moving average.

The 10 DMA of CPC stands at 1.20, 0.11 lower than its recent reading of 1.31 which suggests the worst of the correction could be over. Click here and scroll down for two recent charts.

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Kirk Lindstrom: Disclaimers: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk.

The copyright of the article Investor Sentiment for August 2007 in Investment is owned by Kirk Lindstrom. Permission to republish Investor Sentiment for August 2007 in print or online must be granted by the author in writing.